August 2016

THE CEO GUIDE TO

CUSTOMER EXPERIENCE
Companies that create exceptional customer experiences can set
themselves apart from their competitors.

What do my customers want? The savviest executives are asking this

question more frequently than ever, and rightly so. Leading companies
understand that they are in the customer-experience business, and they
understand that how an organization delivers for customers is beginning
to be as important as what it delivers.

This CEO guide taps the expertise of McKinsey and other experts to explore
the fundamentals of customer interaction, as well as the steps necessary to
redesign the business in a more customer-centric fashion and to organize
it for optimal business outcomes. For a quick look at how to improve the
customer experience, see the summary infographic on the following page.

Armed with advanced analytics, customer-experience leaders gain rapid

insights to build customer loyalty, make employees happier, achieve revenue
gains of 5 to 10 percent, and reduce costs by 15 to 25 percent within two or
three years. But it takes patience and guts to train an organization to see the
world through the customers eyes and to redesign functions to create value
in a customer-centric way. The management task begins with considering
the customernot the organizationat the center of the exercise.

OBSERVE: UNDERSTAND THE INTERACTION THROUGH THE CUSTOMERS EYES

Technology has handed customers unprecedented power to dictate the rules
in purchasing goods and services. Three-quarters of them, research finds,
expect now service within five minutes of making contact online. A similar
share want a simple experience, use comparison apps when they shop, and
put as much trust in online reviews as in personal recommendations.
Increasingly, customers expect from all players the same kind of immediacy,
personalization, and convenience that they receive from leading practitioners
such as Google and Amazon.

Central to connecting better with customers is putting in place several

building blocks of a comprehensive improvement in customer experience.
 AT A GLANCE:
TO IMPROVE CUSTOMER EXPERIENCE, MOVE FROM
TOUCHPOINTS TO JOURNEYS

OBSERVE
Customer journeys consist of a progression
of touchpoints that together add up to the
experience customers get when they interact
with companies. Seeing the world as their
customers do helps leading companies
better organize and mobilize their employees
around customer needs.

SHAPE
Designing the customer experience
requires reshaping interactions
into different sequences and, though
the effort may start small, soon entails
digitizing processes, reorienting
company cultures, and nimbly refining
new approaches in the field.

PERFORM
Rewiring a company to provide leading
customer experiences is a journey in itself,
often taking two to four years and requiring
high engagement from company leaders
and frontline workers alike.

2 McKinsey Quarterly 2016 Number 3

 THE CEO GUIDE

Identify and understand the customers journey.

It means paying attention to the complete, end-to-end experience customers
have with a company from their perspective. Too many companies focus
on individual interaction touchpoints devoted to billing, onboarding, service
calls, and the like. In contrast, a customer journey spans a progression of
touchpoints and has a clearly defined beginning and end.1

The advantage of focusing on journeys is twofold.

First, even if employees execute well on individual touchpoint interactions,
the overall experience can still disappoint (Exhibit 1). More important,
McKinsey research finds that customer journeys are significantly more strongly
correlated with business outcomes than are touchpoints. A recent McKinsey
survey,2 for example, indicates customer satisfaction with health insurance is
73 percent more likely when journeys work well than when only touch-
points do. Similarly, customers of hotels that get the journey right may be
61 percent more willing to recommend than customers of hotels that merely
focus on touchpoints.3

Quantify what matters to your customers.

Customers hold companies to high standards for product quality, service
performance, and price. How can companies determine which of these factors
are the most critical to the customer segments they serve? Which generate the
highest economic value? In most companies, there are a handful of critical
customer journeys. Understanding them, customer segment by customer
segment, helps a business to maintain focus, have a positive impact on customer
satisfaction, and begin the process of redesigning functions around customer
needs. Analytical tools and big data sources from operations and finance
can help organizations parse the factors driving what customers say satisfies
them and also the actual customer behavior that creates economic value.
Sometimes initial assumptions are overturned. In one airport case study, cus-
tomer satisfaction had more to do with the behavior of security personnel than
with time spent in line (Exhibit 2). For a full view of the airports insightful
customer-satisfaction exercise, see Developing a customer-experience
vision, on McKinsey.com.

Define a clear customer-experience aspiration and common purpose.

In large, distributed organizations, a distinctive customer experience
depends on a collective sense of conviction and purpose to serve the

1
 ee Nicolas Maechler, Kevin Neher, and Robert Park, From touchpoints to journeys: Seeing the world as
S
customers do, March 2016, on McKinsey.com.
2
McKinsey US cross-industry customer-experience survey, JuneOctober 2015 data.
3
 or more about journeys versus touchpoints, see the video Linking customer experiences to business
F
outcomes, embedded in the article Are you really listening to what your customers are saying?, by Harald
Fanderl, Kevin Neher, and Alfonso Pulido, March 2016, on McKinsey.com.

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 THE CEO GUIDE
QWeb 2015
CEO guide to customer experience
Exhibit 1 of 4
Exhibit 1
Best-in-class companies optimize customer journeys, not
just touchpoints.

Customers experience companies through end-to-end

experiences, not touchpoints

Sales and Change Moving/ Resolving

onboarding to account new car a problem

Individual touchpoints may perform well even if the

overall experience is poor

Agent Call center Web Support

End-to-end
I want to improve . . . journey journey
satisfaction
Touchpoint
satisfaction 90% 85% 85% 90% 60%

Source: McKinsey Digital Labs

customers true needs. This purpose must be made clear to every employee
through a simple, crisp statement of intent: a shared vision and aspiration
thats authentic and consistent with a companys brand-value proposition.
The most recognizable example of such a shared vision might be the Common
Purpose4 of the Walt Disney Company: We create happiness by providing
the finest in entertainment for people of all ages, everywhere. The statement
of purpose should then be translated into a set of simple principles or standards
to guide behavior all the way down to the front line.

Customer journeys are the framework that allows a company to organize

itself and mobilize employees to deliver value to customers consistently, in
line with its purpose. The journey construct can help align employees
around customer needs, despite functional boundaries. As McKinseys Ron
Ritter elaborated in a recent video, rallying around customers can bring
the organization together.

4
 he Common Purpose is the intellectual property of The Walt Disney Company. See Talking Points, Be our
T
guest. . .again, blog post by Jeff James, December 22, 2011, on disneyinstitute.com/blog.

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 THE CEO GUIDE
QWeb 2016
Customer experience
Exhibit 2 of 4
Exhibit 2
Airport-security issues make up 4 of the top 10 consumer
complaints about airports.

Top complaints by customers after airport travel

Confusing layout Unfriendly Lengthy security- Complete lack of

of security-screening security personnel screening process seating after
checkpoint security screening

SHAPE: REDESIGN THE BUSINESS FROM THE CUSTOMER BACK

Customer-experience leaders start with a differentiating purpose and focus
on improving the most important customer journey firstwhether it be
opening a bank account, returning a pair of shoes, installing cable television,
or even updating address and account information. Then they improve
the steps that make up that journey. To manage expectations, they design
supporting processes with customer psychology in mind. They transform
their digital profile to remove pain points in interactions, and to set in motion

It is a significant challenge to reorient a company

For the full video and accompanying
article, see Designing and starting
up a customer-experience
transformation, on McKinsey.com.
toward the customer. Thats the hard part. The
good part is you actually do have a customer to rally
around and, as you go through this, you get to
know your customers increasingly wellanalytically,
and also as humans, as people having an experience.
Building that alignment and closeness to the customer
brings the organization together and keeps it
together. You stop talking about yourselves and your
processes and the things that you want to do and you
start talking about customers and their experiences
instead.

Ron Ritter

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 THE CEO GUIDE

the culture of continuous innovation needed to make more fundamental

organizational transformations.

Apply behavioral psychology to interactions.

Deftly shaping customer perceptions can generate significant additional value.
One tool leading customer-experience players deploy is behavioral
psychology, used as a layer of the design process. Leading researchers have
identified the major factors in customer-journey experiences that drive
customer perceptions and satisfaction levels.5 For example, savvy companies
can design the sequence of interactions with customers to end on a positive
note.6 They can merge different stages of interactions to diminish their
perceived duration and engender a feeling of progress. And they can provide
simple options that give customers a feeling of control and choice. One pilot
study at a consumer-services firm found that improvements in customer-
satisfaction scores accrued from soft behavioral-psychology initiatives as
well as from hard improvements in operations (Exhibit 3).

Reinvent customer journeys using digital technologies.

Customers accustomed to the personalization and ease of dealing with digital
natives such as Google and Amazon now expect the same kind of service
from established players. Research shows that 25 percent of customers will
defect after just one bad experience.7

Customer-experience leaders can become even better by digitizing the

processes behind the most important customer journeys. In these quick efforts,
multidisciplinary teams jointly design, test, and iterate high-impact
processes and journeys in the field, continually refining and rereleasing them
after input from customers. Such methods help high-performing incumbents
to release and scale major, customer-vetted process improvements in less
than 20 weeks. Agile digital companies significantly outperform their com-
petitors, according to some studies.8 To achieve those results, established
businesses must embrace new ways of working.

5
 ichard Chase and Sriram Dasu, The Customer Service Solution: Managing Emotions, Trust, and Control to Win
R
Your Customers Business, Columbus, OH: McGraw-Hill Education, 2013.
6
 ee John DeVine and Keith Gilson, Using behavioral science to improve the customer experience,
S
February 2010, on McKinsey.com.
7
See Infographic: The cost of crappy customer experiences, August 6, 2015, on thunderhead.com.
8
See The 2015 Customer Experience ROI Study, Watermark Consulting, watermarkconsult.net.

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 THE CEO GUIDE
QWeb 2016
Customer experience
Exhibit
Exhibit33of 4
In one consumer-services pilot, operational improvements
and behavioral-psychology initiatives raised
customer-experience scores.

Customer-satisfaction score1
9 25

16

Baseline

After improving After implementing Score after pilot

operations behavioral-psychology
initiatives

22

1
Likelihood that respondent would recommend the company, product, or service to a friend or
colleague; rated on a scale of 0 to 10, where 10 is most likely; score reflects the sum of
responses of 9 and 10 minus the sum of responses of 0 through 6.

PERFORM: ALIGN THE ORGANIZATION TO DELIVER AGAINST TANGIBLE

OUTCOMES
As the customer experience becomes a bigger focus of corporate strategy,
more and more executives will face the decision to commit their organizations
to a broad customer-experience transformation. The immediate challenge
will be how to structure the organization and rollout, as well as figuring out
where and how to get started. Applying sophisticated measurement to what
your customers are saying, empowering frontline employees to deliver against
your customer vision, and a customer-centric governance structure form the
foundation. Securing early economic wins will deliver value and momentum
for continuous innovation.

Use customer journeys to empower the front line.

Every leading customer-experience company has motivated employees who
embody the customer and brand promise in their interactions with consumers,
and are empowered to do the right thing. Executives at customer-centered
companies engage these employees at every level of the organization, working
directly with them in retail settings, taking calls, and getting out into the
field. In the early years, for example, Amazon famously staged all hands on
deck sessions during the year-end holidays, a tradition that lives on in

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 THE CEO GUIDE

the employee-onboarding experience.9 Some organizations create boards or

panels of customers to provide a formal feedback mechanism.10

Establish metrics that capture customer feedback.

The key to satisfying customers is not just to measure what happens but also
to use the data to drive action throughout the organization. The type of
metric used is less important than the way it is applied.11 The ideal customer-
experience measurement system puts journeys at the center and connects
them to other critical elements such as business outcomes and operational
improvements. Leading practitioners start at the top, with a metric to
measure the customer experience, and then cascade downward into key
customer journeys and performance indicators, taking advantage of
employee feedback to identify improvement opportunities (Exhibit 4).
QWeb 2016
Customer experience
Exhibit 4 of 4
Exhibit 4
The ideal customer-experience measurement system
puts journeys at the center and connects them to other
critical elements.

Customer-
experience
measurement
pyramid Principles

Top-line customer-experience (CE)

CE metric linked to business outcome
metric
Journeys, not touchpoints,
at the core; aim to understand
Journey- performance on each journey
experience
Em

assessment
plo

Regular, objective metrics

serve as leading indicators
ye e

building to each journey

Journey analytics
fe e

and operational key

dba

performance indicators Employees leveraged to assess

customers experience and
ck

identify operational improvements

Organizational Supported by change-

and cultural foundation management capabilities and
customer-centric culture

Source: McKinsey analysis

9
Brad Stone, The Everything Store: Jeff Bezos and the Age of Amazon, New York, NY: Little, Brown, 2013.
10
 ee Dilip Bhattacharjee, Jesus Moreno, and Francisco Ortega, The secret to delighting customers: Putting
S
employees first, March 2016, on McKinsey.com.
11
 ee Harald Fanderl, Kevin Neher, and Alfonso Pulido, Are you really listening to what your customers are saying?,
S
March 2016, on McKinsey.com.

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 THE CEO GUIDE

In order to rewire a company to become a customer-

experience leaderfor most companies this will
be a two-to-three-to-four-year journey. The reason
it takes so long is quite frequently you need to
work across functions, geographies, and customer
segments, and it just takes a while. You need to
start where you can show impact quickly before you
can scale. Once you succeed, though, youll have
a competitive differentiator that others will find
hard to match. For the full video and accompanying
article, see Developing a customer-
Ewan Duncan experience vision, on McKinsey.com.

Put cross-functional governance in place.

Even for companies that collaborate smoothly, shifting to a customer-
centric model that cuts across functions is not an easy task. To move from
knowledge to action, companies need proper governance and leadership.12
Best-in-class organizations have governance structures that include a sponsora
chief customer officerand an executive champion for each of their primary
cross-functional customer journeys. They also have full-time teams
carrying out their day-to-day work in the existing organization. To succeed,
the transformation must take place within normal operations. To foster
understanding and conviction, leaders at all levels must role-model the behavior
they expect from these teams, constantly communicating the changes needed.
Formal reinforcement mechanisms and skill-building activities at multiple
levels of the organization support the transformation, as well. In a recent
video, McKinseys Ewan Duncan describes how rewiring a company in this
way is typically a two- to four-year journey.

Log early wins to demonstrate value creation.

Too many customer-experience transformations stall because leaders
cant show how these efforts create value. Executives, citing the benefits of
improved customer relations, launch bold initiatives to delight customers
that end up having clear costs and unclear near-term results. The better way
is to build an explicit link to value creation by defining the outcomes that

12
 ee Ewan Duncan, Harald Fanderl, and Katy Maffei, Designing and starting up a customer-experience
S
transformation, March 2016, on McKinsey.com.

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 THE CEO GUIDE

really matter, analyzing historical performance of satisfied and dissatisfied

customers, and focusing on customer satisfaction issues with the highest
payouts. This requires discipline and patience, but the result will be early
wins that will build confidence within the organization and momentum to
innovate further.13

Delighting customers by mastering the concept and execution of an

exceptionally good customer experience is a challenge. But it is an
essential requirement for leading in an environment where customers
wield growing power.

13
See Joel Maynes and Alex Rawson, Linking the customer experience to value, March 2016, on McKinsey.com.

Copyright 2016 McKinsey & Company. All rights reserved.

For more on customer journeys, see the full

compendium on our Customer Experience
collection page, at mckinsey.com/global-
themes/customer-experience.

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